Tim Feemster

Managing Principal, Foremost Quality Logistics

Automotive Industry: Better Days Ahead?

As U.S. automakers actively restructure their companies - under the guidance of the federal government - expect, and be ready for, an automotive rebound in the months ahead.

Steve Stackhouse-Kaelble

Apr/May 09

(page 2 of 2)Another possibility making its way through
the auto analyst rumor mill is the potential that GM's Spring Hill,
Tennessee, operation might be among the plants slated to be closed.
"There might be an opportunity for another manufacturer to pick up a
plant," says Handler. For example, that plant could be a nice
complement to Volkswagen's new, billion-dollar Chattanooga assembly
operation. Handler says there has been talk that the company's Audi
subsidiary is considering U.S. assembly.

Meanwhile, Mercedes-Benz has been making plans to expand its assembly
operations in Alabama. The company filed tax abatement requests with
local authorities, proposing a $290 million investment that would
increase the operation's capacity, but has not made further details
available. Plus, GM is said to be in talks with Toyota to determine a
new product that would be produced by the automakers' joint venture,
New United Motor Manufacturing Inc. And GM is trying to stimulate
domestic sales through recent moves by its GMAC Financial Services to
cut borrowing costs and resume making loans to subprime borrowers.

"The Koreans' presence in the U.S. is going to continue to grow," says
de Lorenzo. He is impressed with the gains made by Korean automakers
and expects them to continue to give Toyota and Honda a run for their
money in the American marketplace. In fact, he says, "I can see a point
where Hyundai will add another plant in the U.S. at some point."

Looking to the Future
Will the American industry rebound? According to de Lorenzo, there's
too much talent and too many resources for it not to. While it's
impossible to predict exactly what the industry will look like down the
road, it's a safe bet that technological innovation will be more
important than ever. "Let's not forget that the American automotive
industry is the source of a large chunk of this country's R&D
work," he says.

The government's vision for the salvation of American auto
manufacturing complements its goals for prosperity through energy
innovation, particularly advances in powertrains and batteries. "That
will demand that these companies continue to do R&D," says
Belzowski. "That's where the growth is. Areas that can promote a good
microcosm for R&D for these new technologies will have an
opportunity for some quality jobs."

Already, many communities are searching for ways to put themselves on
the map when it comes to energy-related auto innovation. Texas has in
the past benefited from alliances that built the computer-chip
business, and now is working on similar strategies for getting into
advanced battery manufacturing. Indiana has pulled together its
existing manufacturing and R&D base to launch the Indiana Energy
System Network, an effort to fuel a hotbed of cutting-edge R&D in
advanced transportation and energy systems. Michigan and Kentucky are
seeing a flurry of activity, and so are many other places.

Don't be surprised to see new names jump into the mix - not just
established automakers. For example, Anderson, Indiana-based Bright
Automotive recently unveiled its fleet-oriented IDEA, a 100
mile-per-gallon plug-in hybrid electric. The company has raised
millions of investment dollars and hopes to put its vehicles on the
roads within about three years. "We're going to be seeing a lot of
that," says de Lorenzo. "New enterprises are going to pop up with their
latest take on the technology." The big players are active as well. The
electric Chevy Volt is one of the more talked-about entries, but Toyota
also has some new ideas in the works, including a small hybrid designed
to compete against the Honda Insight hybrid.

"This is a really exciting time, because the government is in support
of this," says Belzowski. "A lot of companies are trying to put their
ideas into physical form. That kind of entrepreneurism will be alive
and well, for alternative powertrain technology in particular."

Layoffs, Then Labor Shortages?
"I think there's going to be a fair amount of skilled labor unemployed
in a lot of parts of this country," says de Lorenzo. Certainly, that's
what the automakers have promised. But even if there's not a flurry of
new automotive plants in the near term, Cole believes that communities
interested in hosting automotive production need to keep preparing for
a future when - believe it or not - there will be a shortage of auto
workers. Waves of retirements remain foreseeable, and tomorrow's auto
jobs aren't going to be filled by just anybody. "It has to be people
with a minimum of a two-year community college [degree]," he says. "If
you don't have that in your community, you're not going to get the
expansion when it happens."

It may seem counterintuitive right now, but Cole says forward-thinking
communities will keep work force issues in mind as the economy sorts
through its problems and potential retirees starting thinking again
about retiring: "What we're really concerned about the most is an
educated work force. The one thing that can really hurt a community is
a lack of an educated work force."